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November 1, 2012Adrienne Randle Bond, Allen Sparkman

The Series LLC: a New Planning Tool

Texas adopted new provisions permitting the creation and operation of series limitedliability companies (the “Series LLC”) under Texas law in 2009.1 This paper discusses thestate of law on Series LLCs under the Texas Business Organizations Code (“TBOC”) withsome consideration of other jurisdictions’ laws and practice pointers for resolving the issuespresented by the statutory formulation for the Series LLC. After discussing what Series LLCsare and can do, the paper will analyze points of ambiguity and development where the resultsof the use of the Series structure may not be perfectly clear. This vehicle for formation is stillunder development, but, in the right circumstances, presents an elegant solution to ownershipand management of closely related, but not identical, groups of assets.

The Series LLC: A New Planning Tool

While the Series LLC is a new vehicle that has some unanswered questions, it is a solution to problems of management of assets that have common, but not identical features. The statute makes very clear the ability to deal with assets and the transactions surrounding assets that may be held by an entity. If you focus on the feature of asset management and commonality, but not identity, the confusion caused by the flexibility permitted in the TBOC provisions falls away, and you are able to focus on fact patterns that are truly facilitated by this structure. The single most ―common‖ commonality is management, but the commonality may be the nature of the asset (such as the accumulation of one large asset from divided parts) or the development of an asset over time, where ownership may shift. We would like to encourage you to join the ranks of the optimists and urge you to study and think about this new vehicle. Consider embracing the good points of a Series LLC in transactions appropriate for the solutions that it provides.